Saudi Arabia loses out as US oil refiners turn to Canada

Reuters

• US imports of Saudi oil drop
• Canadian exports growing
• Saudi exports heading east

US crude oil imports from Saudi Arabia have dropped to one of the lowest points since the start of the decade, as American refiners increasingly turn to supplies from Canada.

Imports fell to only 13,000 barrels per day (bpd) in the week ending October 25, according to the US Energy Information Administration – the lowest level besides January 2021, when they dropped to zero during the Covid-19 pandemic.

In the month of October the US bought on average 190,500 bpd of oil from Saudi Arabia, more than 50,000 bpd less than September’s average of 243,000.

Other than October, average US imports of Saudi oil have not fallen lower than 240,000 bpd and have reached as high as 390,000 bpd each month in 2024.

However, imports are now falling as US refiners diversify supplies from alternative producers including Canada, Venezuela and Brazil, according to analysts.

Since May, Canada’s Trans Mountain pipeline has sent more oil to the US west coast.

The $25 billion Trans Mountain pipeline expansion nearly tripled capacity to Canada's Pacific Coast to 890,000 bpd.

Nonetheless, shipments of Saudi crude to the US Gulf Coast are forecast to continue as Saudi Aramco supplies its Motiva refinery, located in Port Arthur in Texas.

The US Energy Information Administration (EIA) estimates that Motiva’s complex ranks as the second-largest refining operation in the US, capable of processing 626,000 bpd.

“Shifts in pipelines and politics impact which crudes of suitable grades make the most sense for them to buy,” said US-based Justin Alexander, director of Khalij Economics. “The vast majority of Saudi crude goes East; the US has not been an important export market for the last few years.”

Saudi Arabia was the third-largest source of petroleum for the US – including crude oil – in 2022, behind Canada and Mexico. According to the EIA, it accounted for 7 percent of total US petroleum imports.

Rohit Rathod, oil market analyst at Vortexa, a supplier of oil market data, said Saudi Arabia also sent barrels to European and Asian markets to maintain market share: “The drop seen in EIA data is also due to summer power generation demand in Saudi Arabia, which led to barrels being diverted away from exports.”

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US refiners have also been importing heavier fuel oil from the kingdom and other Gulf states following a ban on supplies from Russia.

“US refiners turned to the Middle East with less or zero Russian cargos available, stretching Middle East-US fuel flow,” Peter Norfolk, head of freight pricing at S&P Global, told an energy conference in Dubai this week.

Since January 2022, they have received 148 shipments of fuel oil from the Middle East, according to S&P.

Iraq has been the largest contributor, with a substantial increase from 2021 to 2022. It maintained the largest consistent share this year, followed by Saudi Arabia, the UAE, Oman and Kuwait.